Fasten Your Seatbelts

County can expect plenty of turbulence during '09 reappraisal

By Andy Meek

GET READY: County officials such as Deidre Malone, budget committee chair for the Shelby County Board of Commissioners, predict a tough year ahead for taxpayers. -- Photo By Andy Meek

As the housing market continues its roller coaster ride, Shelby County officials have begun to fret openly amongst each other about something that was little more than a private concern before now.

After years of watching new houses multiply in the suburbs, property values rise and the county's tax base continue to expand, it appears a day of reckoning awaits county taxpayers before the end of 2009. A recent spate of bad budget news brought announcements that included a larger-than-expected budget shortfall for the county as well as the fact that the county's tax base will not grow at all this year.

It gets worse. Every piece of property in the county will go through a reappraisal next year, an event that happens every four years and usually results in a larger tax base because of new lots and higher property values. After the 2005 reappraisal, for example, the county's tax base grew by 12 percent, county figures show.

The 2009 reappraisal will be a different story.

"It's a real unknown at this point," said Jim Huntzicker, the county's chief administrative officer. "Every four years we get a bump because of the reappraisal. It would appear that that won't happen in '09.

"You know, we were talking with our ratings agencies a couple of weeks ago, and they said, 'The difference between Shelby County and other places is you guys acknowledge it and discuss that you've got an imbalance on the front end.' It's out there, we just have to deal with it."

Dubious surplus, steep plateau

That's important because property tax increases would all but certainly follow a slowdown of growth in the county's tax base. To understand why, the 2005 county reappraisal offers a clue.

The tax base that year was bolstered by a mixture of rising home values and an explosion of building activity, especially in suburban areas. The Shelby County Board of Commissioners used those values from the 2005 reappraisal to set the tax rate, which commissioners chose to keep at $4.04 per $100 of assessed value.

Even so, voters still ended up paying what amounted to a tax increase.

Tennessee state law requires that governments must reset their tax rates following a reappraisal so the reset rate generates the same amount of money collected before the reappraisal. So with the boost in the tax base, county officials in 2005 calculated that resetting the tax rate 14 cents lower, to $3.90, would produce the same amount of money as collected before the reappraisal.

That's why keeping the rate unchanged at $4.04 basically represented a tax increase - the new rate was 14 cents higher than the reset rate required by law.

And that 14-cent hike followed what county officials acknowledged was a good year in real estate.

"This year is exacerbated by the fact that in years past we could almost always count on new lots out in Arlington and other parts of the county coming on to the tax rolls," said Shelby County Mayor A C Wharton Jr. "We could always count on 1 (percent) to 1.5 percent growth. What's different this year? This year, we simply cannot count on any growth at all."

Brace yourselves

Even though she won't be involved with it next year, Shelby County Assessor Rita Clark agreed with the concern about the 2009 reappraisal.

Both Clark and Cheyene Johnson, whom Clark is backing as her successor, were on hand late last week when Wharton announced the county's current budget shortfall is larger than expected.

It didn't factor prominently into the discussion that day, but several county officials on hand - including Clark and Huntzicker - talked openly about what the county is facing next year.

Clark put it bluntly: "It's going to be the most difficult reappraisal Shelby County has ever seen," she said.